When is Special Treatment Unequal Treatment? Reflections on Tim Geithner, Michael Phelps, and Rod Blagojevich

By MICHAEL C. DORF


Monday, Feb. 9, 2009

What do Treasury Secretary Tim Geithner, Olympic gold medal record-holder Michael Phelps, and Illinois ex-Governor Rod Blagojevich have in common? Each has been involved in a recent scandal in which it can plausibly be argued that his prominence led to special treatment—either favorable or unfavorable. Among other things, Geithner failed to make timely self-employment tax payments on salary he earned from the International Monetary Fund (IMF) Phelps was photographed apparently smoking marijuana from a bong at a University of South Carolina party and Blagojevich was recorded scheming to shake down various Illinois figures.

Each case raises the specter of special treatment. Were Geithner, Phelps, and Blagojevich—as well as two Obama nominees who withdrew from consideration for administration positions because of tax issues—treated better or worse than the average person because of their prominence? Answering that question is harder than it may at first appear, because the average person is not under consideration for a Cabinet position, an Olympic champion, or governor of a state. Figuring out whether Geithner, Phelps, and Blagojevich have been treated equally may thus shed light on the meaning of equality for people in the public eye.

Taxes and the Cabinet

Among President Obama's initial nominees to high-ranking positions in his administration, three—Geithner for Treasury Secretary, Tom Daschle for Secretary of Health and Human Services, and Nancy Killefer for chief performance officer—had failed to make timely payments of one or another tax. Daschle, in addition, had been involved in extensive lobbying of his former Senate colleagues, although his nomination did not technically violate the Obama policy of not hiring lobbyists because Daschle merely worked for registered lobbyists, without directly lobbying himself. Nonetheless, the "distraction" of tax problems and lobbying involvement led Daschle and Killefer to withdraw. Accordingly, I shall focus here on Geithner, who was confirmed despite his tax issues.

What exactly was Geithner's main tax problem? When he was employed by the IMF from 2001 through 2004, Geithner's salary was not subject to income tax. However, in lieu of payroll taxes (essentially Social Security and Medicare premiums) by law Geithner was required to pay both his and his employer's portions of the applicable self-employment taxes. He failed to make the employer portion of those payments, as a result of what he described as carelessness.

When Geithner was notified that he owed the self-employment taxes, he paid them—but only for 2003 and 2004. The statute of limitations had run on his 2001 and 2002 earnings, and so Geithner apparently figured that there was no need to pay the government for those years. Only when his nomination for Treasury Secretary was announced, did Geithner go back and pay the tax for 2001 and 2002. Under questioning at his confirmation hearing from Arizona Senator Jon Kyl, Geithner insisted that he did not originally realize that he also owed tax on the earlier years. To many observers, this explanation sounded either disingenuous or naïve—thus calling into question either Geithner's ethical fitness or his substantive qualifications for the job. Nonetheless, believing that Geithner was the right man for a critical job at a time of crisis, the Senate overlooked this lapse (and a few other ones), confirming him by a vote of 60-34.

So, did Geithner receive special treatment, and if so, especially favorable or unfavorable treatment? The answer depends on our benchmark. Consider a hypothetical former IMF employee who made the same error that Geithner did and received the same notice of back taxes owed. Let's call him Joe the Banker. Like Geithner, Joe would have been required to pay the back taxes and interest. As with Geithner, the IRS might not have assessed a penalty with respect to Joe. And like Geithner, Joe the Banker could have gotten away with stiffing the government for the years outside of the statute of limitations.

Viewed in this way, Geithner actually suffered a penalty that Joe would not suffer: In order to win confirmation, Geithner judged that he needed to remedy the unpaid self-employment taxes for 2001 and 2002. By contrast, Joe's relative obscurity enables him to avoid that further back payment.

Accordingly, absent evidence that the IRS gave Geithner any special favors in virtue of his position at the Federal Reserve Bank of New York, it appears that far from getting a special break, Geithner may actually have ended up paying more than he would have paid if he had been just an ordinary former IMF banker.

Does that mean that fretting over Geithner's taxes was unwarranted? Hardly. But the comparison with Joe reveals that the real problem with the Geithner nomination is not unequal treatment. The real problem is hypocrisy and example-setting. With a very low audit rate, the U.S. Treasury relies to a large degree on voluntary compliance for collecting taxes. If a person who, by his own admission, was at least careless in paying his own taxes, can still be nominated and confirmed to run the department of the federal government responsible for collecting our taxes, then there is a risk that ordinary Americans will conclude that they too can under-pay their taxes, figuring that they can always make up the difference in the unlikely event that they get caught.

Should Role Models Be Held to a Higher Standard?

Put differently, Geithner's tax sloppiness (or worse) was problematic because the Treasury Secretary is a role model for taxpayers. And we hold our role models to higher standards than everyone else. That is, after all, what makes them role models.

Thus we come to the case of Michael Phelps. In addition to his extraordinary physical gifts, Phelps displays the admirable character trait of a phenomenal work ethic. He would not have set records for the most gold medals in a single Olympics and the most lifetime Olympic gold medals were it not for his willingness to spend countless hours in the pool, pushing his body to its limits.

Yet in other respects, Phelps is a callow youth. After his victories in the 2004 Olympics, he was arrested and pled guilty to a Maryland drunk driving charge. And just last week, a British tabloid published a photograph of Phelps apparently inhaling from a bong last fall. As a result of that incident, Phelps has been suspended from competitive swimming for three months, Kellogg has decided not to renew his endorsement deal, and he may face criminal charges. Because the average person is not involved in competitive swimming and lacks an endorsement contract, here we can focus on the criminal charge.

Sheriff Leon Lott of Richland County, South Carolina announced last week that his office "is making an effort to determine if Mr. Phelps broke the law. If he did, he will be charged in the same manner as anyone else. The sheriff has a responsibility to be fair, to enforce the law and to not turn a blind eye because someone is a celebrity."

That certainly sounds like the language of equality, but it is highly doubtful that Richland County would conduct the sort of investigation that would be necessary to nail Phelps were it not for his celebrity. Thus, like Geithner, Phelps may be required to pay a higher price because of his status than would, say, Joe the Pothead.

Possession of a personal-use quantity of marijuana is a misdemeanor under South Carolina law. The University of South Carolina, in Richland County, has a total enrollment of about 20,000 students, most of them undergraduates. Using conservative estimates based on various academic studies, it is probably fair to say that in any given month, at least ten percent of students will use marijuana at least once. That means that there have been thousands of instances of South Carolina students using marijuana in just the time since Phelps raised a bong to his lips. Is it conceivable that the Richland County Sheriff's office plans to pursue any of those cases with the vigor that would be required to prosecute Phelps, interviewing witnesses and tracking down forensic evidence of ephemeral marijuana possession?

Viewed in this perspective, it seems clear that to treat Phelps "in the same manner as anyone else" would mean not pursuing criminal charges, unless perhaps a police officer directly witnessed Phelps in possession of marijuana.

To be sure, Phelps is a role model, but that is why it is entirely appropriate for Kellogg not to renew his endorsement contract. With so much of its marketing focused on young children (itself a questionable practice for the maker of sugary breakfast foods!), Kellogg is within its rights in worrying about backlash from customers who, in turn, worry about the message their kids might infer from seeing a pot-smoker lionized on the cereal box.

The three-month suspension presents yet a different set of issues. Here the operative question is how another competitive swimmer—but not one who had won Olympic gold medals—would be treated. Marijuana is not a performance-enhancing drug, but its use still violates various rules. If Phelps is receiving any special treatment—either harsher or more lenient—than Joe the Swimmer, then that truly would be unequal.

To be clear, though, the fact that Phelps is a role model plays no legitimate role in the question of whether he should be criminally charged for misdemeanor possession of marijuana. Sheriff Lott is right in stating that, for these purposes, Phelps should be treated no differently from a non-celebrity he appears to be wrong, however, in suggesting that this means Phelps should be subject to a criminal investigation.

Was Blagojevich Denied a Fair Trial?

The Geithner and Phelps cases shed light on the proper application of the moral principle of equality to celebrities and other public figures. Equality, it is frequently said, requires similar treatment for people who are similarly situated. Geithner was similarly situated to Joe the Banker with respect to his tax liability, but not with respect to his holding office as Treasury Secretary. Likewise, Phelps is similarly situated to Joe the Pothead for purposes of criminal prosecution, and to Joe the Swimmer for purposes of competitive eligibility, but dissimilarly situated with respect to his endorsement contracts.

What about Rod Blagojevich? The Illinois now-ex-Governor boycotted his impeachment trial (except for giving a closing statement) because he believed that the rules of evidence adopted by the state Senate denied him a fair trial. Blagojevich repeatedly contrasted the impeachment procedures with the procedures our legal system requires for a criminal trial.

Yet that baseline was inapt. The procedural protections of the criminal justice system are designed to minimize the risk that an innocent person goes to prison. Incarceration is, after all, a severe encroachment on liberty. Not being Governor of Illinois is hardly a comparable fate. Accordingly, the right question to ask about the Illinois impeachment procedures was not whether they were equivalent to the procedures of a criminal trial, but whether they were well-suited to determine the fitness of Blagojevich to continue as Governor. (As I noted in a recent blog entry, those procedures were constitutional, if not necessarily perfect.)

If the criminal trial that U.S. Attorney Patrick Fitzgerald has in store for Rod Blagojevich proves to be procedurally unfair, then Blagojevich will have a right to complain. So far as that trial is concerned, he should be treated no differently from anyone else. But there can be no inequality in how celebrities and public figures are treated relative to other people, with respect to matters that never arise for ordinary folks.

If we are worried about equality under the law—and we should be—then we should focus our attention, instead, on the truly troubling inequities: racial disparities in charging, conviction, and sentencing, and the dramatic effect of differences in the quality of lawyering typically available to the rich and to the poor.


Michael C. Dorf is the Robert S. Stevens Professor of Law at Cornell University. He is the author of No Litmus Test: Law Versus Politics in the Twenty-First Century and he blogs at michaeldorf.org.



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